What is Leasehold?
Leasehold or concession properties in Nicaragua are properties owned by the government; you buy the right to rent or lease that land, paid in a small annual fee. About 60 percent of the coast of Nicaragua is comprised of leasehold land, due to a law passed in 1917 that stated that all land within 2km of the ocean that was not previously titled became national land. There are similar type of laws in many central / south American countries. Even Mexico has something similar with the fideicomiso.
What is the process of buying leasehold?
In certain municipalities, but not all, the transfer of rights to leasehold land has to be reviewed and approved, and each process is a little different. Often these reviews happen only once a month at special municipal meetings, so it’s important to take that into consideration in the timeline of buying the property. It is not uncommon for it to be a two-step and therefore two month process to approve the transfer. It is important to note that a municipal approval is not always required and this process may not apply to you.
Are there many risks with buying leasehold?
There is little risk involved with buying/holding leasehold land. Anything built on leasehold land is owned fee simple and can be legally and properly registered in your name. Building on leasehold land is recommended as you then own real property permanently fixed to that land, which makes your leasehold stronger and more secure. There is essentially no risk of losing your lease with a structure on that land. The largest but still unlikely risk is if there is no structure on the property and the government decides to lease the land to someone who would use and improve on the land. In search of historical records you will see there has been no taking of land or reassignment by the government. Foreign investment is very important to the Nicaragua economy.
How does leasehold affect the value of my property?
Leasehold land is not necessarily good land investment as you do not outright own the land. With a structure on the land (previous or new construction) the value and security becomes stronger as that structure cannot be simply ‘taken’ from you, and that will add value to the land. However, leasehold land does reduce the market for a future sale as some people, mostly from the States, will not consider buying leasehold land.
